CombinatoRx Reports Financial Results for the Second Quarter 2010

CAMBRIDGE, Mass.--(BUSINESS WIRE)-- CombinatoRx, Incorporated (NASDAQ: CRXX) today reported financial results for the second quarter ended June 30, 2010.

“With Exalgo approved and launched in the U.S. market and the merger with Neuromed complete, this marks the first quarter of Exalgo royalty revenue and the first quarter without merger-related charges to account for. We are very pleased with the effort and resources Covidien has put behind the Exalgo launch, validating our choice of marketing partner to provide this important new therapy to the many patients who suffer with moderate to severe pain,” commented Mark H.N. Corrigan, MD, President and CEO of CombinatoRx. “We are looking forward to a very busy second half of 2010 including finalizing Phase 2 clinical plans for Synavive, completing preclinical evaluation of our N-type calcium channel programs to determine which candidate will be selected to move forward into proof-of-concept clinical trials, and continuing successful discovery efforts with our collaborators.”

Second Quarter 2010 and Recent Accomplishments:

  • Covidien launched the commercial sale of Exalgo® (hydromorphone HCl) extended-release tablets, (CII), the only extended-release hydromorphone treatment available in the United States, on April 26, 2010, and in the second quarter of 2010 we began to earn royalty revenue from Covidien based upon a percentage of Exalgo net sales. During the quarter ended June 30, 2010, we recognized $1.1 million in revenue related to Exalgo royalties. Exalgo provides relief to opioid-tolerant patients suffering from moderate to severe chronic pain for 24 hours per dose.
  • Fovea Pharmaceuticals, a division of Sanofi Aventis, advanced Prednisporin™, a CombinatoRx-derived ophthalmology product candidate, into Phase 2b clinical testing for persistent allergic conjunctivitis, triggering a $500,000 milestone payment to CombinatoRx. In addition to the milestone payment, CombinatoRx will be eligible to receive further development and regulatory-based milestone payments for Prednisporin of up to approximately $40.0 million and, if commercialized, tiered royalty payments of up to 12% of net sales.
  • U.S. Army Medical Research Institute of Infectious Diseases awarded CombinatoRx a $1,056,000 contract on May 21, 2010 to utilize its combination high throughput screening technology (cHTS™) to discover drug combinations to treat infections by Alphaviruses, which are mosquito borne viruses whose infection can cause severe and fatal encephalitis in humans.
  • CombinatoRx was added to both the Russell 3000 and 2000 Index during Russell’s annual reconstitution of its U.S. and global indexes, based on its market capitalization on June 25, 2010. Russell indexes are widely used by investment managers and institutional investors for index funds and as benchmarks for both passive and active investment strategies.
  • Novel synergistic mechanisms for the treatment of multiple myeloma using cHTS were presented at the American Association for Cancer Research meeting, held from April 17-21, 2010 in Washington, DC. These preclinical studies reinforced the rationale for investigating A2A and B2AR agonists in the treatment of multiple myeloma and other B-cell malignancies and continue to highlight the power of the cHTS technology to interrogate combination activity across large panels of cancer cells to identify novel mechanisms.
  • CombinatoRx plans to change its name and NASDAQ ticker symbol to Zalicus Inc. (NASDAQ: ZLCS) pending shareholder approval on September 8, 2010.

Second Quarter 2010 Financial Results (Unaudited):

As of June 30, 2010, CombinatoRx had cash, cash equivalents, restricted cash and short-term investments of $52.2 million compared to $55.3 million on March 31, 2010.

Total revenue was $2.9 million in the second quarter of 2010 compared to $3.3 million reported in the second quarter of 2009. This decrease was primarily due to the termination of our collaboration with Angiotech in 2009, partially offset by our initial royalty revenue from net sales of Exalgo.

Net loss for the quarter ended June 30, 2010 was $8.6 million, or ($0.10) per share, as compared to net income of $8.0 million, or $0.23 per share, in the second quarter of 2009. The second quarter of 2010 included $4.7 million of intangible asset amortization relating to Exalgo, $0.4 million in stock-based compensation expense and $0.6 million in depreciation expense. The second quarter of 2009 included a $15.1 million gain from the divestiture of our Singapore operations, $1.2 million in stock-based compensation expense and $1.9 million in depreciation expense. Net cash used in operating activities for the quarter ended June 30, 2010 was $2.8 million, as compared to net cash used in operating activities of $2.6 million for the second quarter of 2009.

Net loss for the six months ended June 30, 2010 and 2009 was $11.7 million, or ($0.15) per share, and $1.5 million, or ($0.04) per share, respectively. The first half of 2010 included $9.4 million of intangible asset amortization relating to Exalgo. The 2010 year-to-date results also included a one-time, non-cash charge of $29.3 million due to loss on contingent consideration related to the Neuromed merger. Stock-based compensation expense was approximately $2.0 million in the first half of 2010 as compared to approximately $2.5 million in the first half of 2009. Depreciation expense was approximately $1.2 million in the first half of 2010 as compared to approximately $2.6 million in the first half of 2009. The first half of 2009 included a $14.1 million gain from the divestiture of our Singapore operations. Net cash provided by operating activities for the six months ended June 30, 2010 was $26.7 million, as compared to net cash used in operating activities of $14.3 million for the six months ended June 30, 2009.

Research and development expense totaled $4.6 million in the second quarter of 2010 compared to $6.1 million in the second quarter of 2009. The decrease was primarily due to an increase in consulting and preclinical expenses offset by a decrease in formulation and external clinical trial expenses and a decrease in laboratory supplies, facilities, depreciation and other overhead costs associated with CombinatoRx’s 2008 and 2009 restructurings.

General and administrative expense was $2.6 million in the second quarter of 2010 compared to $4.8 million in the second quarter of 2009. The decrease was primarily due to decreases in legal and consulting fees and decreases in salaries, benefit and stock-based compensation expense associated with CombinatoRx’s 2008 and 2009 restructurings.

About CombinatoRx:

CombinatoRx, Incorporated (CRXX) develops novel drug candidates with a focus on the treatment of pain and inflammation. The company applies its combination drug discovery capabilities and its selective ion-channel modulation platform to generate innovative therapeutics. To learn more about CombinatoRx, please visit www.combinatorx.com.

Forward-Looking Statement:

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning CombinatoRx, the product Exalgo™ and its ability to generate future royalty revenue for CombinatoRx, the product candidate Synavive, the CombinatoRx selective ion channel modulation platform, its combination drug discovery technology cHTS, its collaborations with Fovea and USAMRIID, its B-cell malignancy program and its potential, CombinatoRx’s plans to rename the company, and CombinatoRx’s financial condition, results of operations, cash position and business plans. These forward-looking statements about future expectations, plans, objectives and prospects of CombinatoRx may be identified by words like "believe," "expect," "may," "will," "should," "seek," or “could” and similar expressions and involve significant risks, uncertainties and assumptions, including risks related to the sale and marketing of Exalgo by Covidien, risks related to the development and regulatory approval of CombinatoRx’s product candidates, the unproven nature of the CombinatoRx drug discovery technologies, the ability of Covidien to perform its obligations under its agreement with CombinatoRx relating to Exalgo, the ability of the Company or its collaboration partners to initiate and successfully complete clinical trials of its product candidates, the Company's ability to obtain additional financing or funding for its research and development and those other risks that can be found in the "Risk Factors" section of CombinatoRx's annual report on Form 10-K on file with the Securities and Exchange Commission and the other reports that CombinatoRx periodically files with the Securities and Exchange Commission. Actual results may differ materially from those CombinatoRx contemplated by these forward-looking statements. These forward looking statements reflect management’s current views and CombinatoRx does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this release except as required by law.

(c) 2010 CombinatoRx, Incorporated. All rights reserved.

CombinatoRx, Incorporated

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

     
Three months ended June 30, Six months ended June 30,
2010   2009 2010   2009
Revenue:
Collaborations and other $ 2,717 $ 3,005 $ 43,782 $ 5,334
Government contracts and grants   211   313     476     617  
 
Total revenue   2,928   3,318     44,258     5,951  
 
Operating expenses:
Research and development 4,617 6,106 11,998 13,243
General and administrative 2,569 4,824 6,431 8,471
Amortization of intangible 4,685 9,369
Restructuring     (425 )       16  
 
Total operating expenses   11,871   10,505     27,798     21,730  
 
(Loss) income from operations (8,943 ) (7,187 ) 16,460 (15,779 )
Interest income 30 60 37 188
Interest expense (11 ) (27 )
Loss on revaluation of contingent consideration (29,286 )
Other income (expense)   15   (11 )   (127 )   (7 )
 
Net loss before provision for income taxes (8,898 ) (7,149 ) (12,916 ) (15,625 )
Income tax benefit   300       1,210      
 
Net loss from continuing operations   (8,598 ) (7,149 )   (11,706 )   (15,625 )
 
Discontinued operations:
Loss from discontinued operations (529 ) (1,536 )
Gain on disposal of discontinued subsidiary     15,640         15,640  
 
Gain on discontinued operations     15,111         14,104  
 
Net (loss) income $ (8,598 ) $ 7,962   $ (11,706 ) $ (1,521 )
 
Net (loss) income per share — basic and diluted:
From continuing operations $ (0.10 ) $ (0.20 ) $ (0.15 ) $ (0.44 )
From discontinued operations     0.43         0.40  
 
Net (loss) income per share — basic and diluted $ (0.10 ) $ 0.23   $ (0.15 ) $ (0.04 )
 
Weighted average number of common shares used in net (loss) income per share calculation — basic and diluted   88,946,220   35,026,106     76,199,264     35,019,779  
 

CombinatoRx, Incorporated

Condensed Consolidated Balance Sheets

(in thousands, except per share data)

(Unaudited)

   

June 30,
2010

December 31,
2009

 
Assets
Current assets:
Cash and cash equivalents $ 2,175 $ 8,779
Restricted cash 750 750
Short-term investments 47,498 14,551
Accounts receivable 2,249 2,927
Prepaid expenses and other current assets   1,335     5,415  
 
Total current assets 54,007 32,422
Property and equipment, net 7,506 8,380
Intangible asset, net 36,055 45,423
Restricted cash and other assets   1,818     1,927  
 
Total assets $ 99,386   $ 88,152  
 
 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $ 1,094 $ 4,269
Accrued expenses 2,342 5,495
Accrued restructuring 521 1,274
Deferred revenue 2,250 2,750
Current portion of lease incentive obligation   284     284  
 
Total current liabilities 6,491 14,072
 
Deferred revenue, net of current portion 3,167 2,667
Deferred rent, net of current portion 759 775
Lease incentive obligation, net of current portion 1,584 1,726
Other long-term liabilities 2,103 3,235
Contingent consideration 12,764
 
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000 shares authorized; no shares issued and outstanding
Common stock, $0.001 par value; 200,000 shares authorized; 89,020 and 117,828 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively 89 118
Additional paid-in capital 316,485 272,405
Accumulated other comprehensive income (loss) 22 (2 )
Accumulated deficit   (231,314 )   (219,608 )
 
Stockholders’ equity   85,282     52,913  
 
Total liabilities and stockholders’ equity $ 99,386   $ 88,152  



CONTACT:

CombinatoRx, Incorporated
Justin Renz, 617-301-7575
Senior Vice President, CFO
[email protected]
or
Gina Nugent, 857-753-6562
[email protected]

KEYWORDS:   United States  North America  Massachusetts

INDUSTRY KEYWORDS:   Health  Biotechnology  Pharmaceutical  Professional Services  Finance

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